Vote for a capital improvement - Roofs?

My HOA assessed our develepment $6250 each for a new roof, no vote of the members and total contract price is $900K. Our bylaws say that a member vote is needed for a capital improvement over $30K, a NYS Certificate of Capital Improvement was signed by our HOA President and included in the roofing contract, yet he says it is NOT a capital improvement and does not require a member vote. The bylaws say that the HOA is responsible for maintaining our roofs. In the Certificate of Capital Improvement it says "the replacement of 144 roofs", yet they are saying this replacement is a repair and the development needs roofs! They are completely ripping off our old roofs and putting on new ones. Is this a capital improvement or not? One board member said "you cannot do a capital improvement on property you do not own and the development is doing the roofs, and they don't own our roofs". Thus, it's not a capital improvement. We are being assessed for the entire replacement amount, no monies in any fund is covering any portion of this. Can the HOA president file a New York State and Local Sales and Use Tax Certificate of Capital Improvement (Form ST-124) with the state for tax purposes, yet not call this a capital improvement within our development so that no member vote is needed??

There are 144 attached townhomes. I own my roof but the HOA maintains them. There is nobody above or below me.

THE MONIES FOR THIS ROOF ASSESSMENT IS BEING PAID BY THE OWNERS OF THE ROOFS (THE HOMEOWNERS). No money is being taken from a fund. Our $$ is being put into this fund and the HOA pays the contractor from the fund.

THE FOLLOWING is part of a covenants summary written by a homeowner in here. This pertains to the capital improvement.

The Association is governed by a 5-member Board of Directors all of whom are homeowners.

The 2011 Operating Budget includes an Operating Fund to which all 316 homes are required to contribute $315 per month; a Capital Reserve to which all 316 homes are required to contribute $25 per month; and a Townhouse Reserve to which Section 1 & 1A Homeowners are required to contribute $33 per month.
Total monthly dues for Section 1& 1A Homes are $373; total monthly dues for Section 2 & 3 Homes are $340. Section 1 & 1A Homeowners’ dues are $43 – nearly 13% -higher than Section 2 & 3 Homeowners’ dues. Total Operating Budget Expenses are $1,285,366; Total Capital funds -$30,000;

Total fund contributions are $1,346,304, $60,938 (4.7%) more than total Operating Budget expenses; $30,938 (2.4%) more than total Operating Budget expenses and Capital expenditure forecast.
Total Homeowner contributions of $1,346,304 + “Other Income” of $90,886 = $1,437,190; this amount exceeds total budgeted expenses of $1,315,366 – including projected capital expenditures – by $121,824 (9%)
The projected roof replacement project cost is $877,000; 68% of the Operating Budget; 65% of total Homeowner contributions; 61% of total receipts.
The proposed assessment of $6,250 per Section 1 & 1A Home = $900,000; $13,000 (1.5%) more than the project total.

Discussion

The answers to the basic questions that were raised in this matter led to additional questions. The purpose of this discussion is to explore those questions and their answers more fully.

Question #1: Do the provisions of the covenants invest the Board of Directors with the authority to approve the roof replacement project and impose an assessment of nearly $1 million on Section 1 & 1A homeowners without member approval?

The answer to Question #1 is found in the following provisions:

By-Laws

Article VII. Board of Directors

Section 5. Powers

1. The Board of Directors may increase the monthly assessments or vote a special assessment in excess of that amount, if required, to meet any additional necessary expenses.
2. To collect, use and expend the assessments collected to maintain, care for and preserve the roads, walks, recreation facilities, parking areas and landscaping, roof repair [emphasis added] and painting of the exterior of the Homes on the Properties.
7. To employ workmen, contractors and supervisory personnel, and to purchase supplies and equipment, to enter into contracts and provide maintenance and other services.

Article XI. Assessments and Finances

Section 2. Purpose of Assessments
The assessments levied by the Association shall be used exclusively for the purpose of promoting recreation, health . . . and in particular for the improvement and maintenance of properties . . . and of the Homes situated upon the Properties, including without limiting the foregoing, the payment of taxes (if any), insurance thereon, and repair, replacement and additions thereto, and the cost of labor, equipment, materials, services, management and supervision thereof [emphasis added]

Section 3. Basis of Assessments
(a)
. . . the Board of Directors shall prepare . . . a budget which shall include amounts required, including but not limited to operational items such as insurance, repairs, maintenance, equipment rental and other expenses (Operating Budget). The Operating Budget shall also include a line entry or entries to provide for future Capital improvements.

The Operating Budget shall be subject to approval by the Association at a special meeting to be held not less than fifteen (15) nor more than thirty (30) days after completion of the Operating Budget . . . In addition to the operating budget items as aforesaid, the Board of Directors may include an item for contingencies not to exceed five (5) percent of the aggregate of budgeted items [emphasis added].

However, the mandatory submission for membership approval shall be deemed waived if the total Operating Budget does not exceed the prior fiscal year’s Operating Budget (including the contingency item) by two (2) percent plus the percentage increase of the CPI . .

(b) Simultaneously with the Operating Budget, described in 3(a) above, the Board of Directors shall also complete a Capital Budget, consisting of items for Capital improvements to be commenced during the budget year as in 3(a) above. Said Capital budget [sic] shall be submitted to the Association for approval at the aforesaid meeting. Mandatory submission for membership approval shall be deemed waived if any particular project does not exceed ten thousand dollars with a maximum of thirty thousand dollars for all projects [emphasis added].
(e) The Board of Directors may assess the Association members, in addition to current assessments, for emergency expenditures, not contemplated by the Operating or Capital Budgets. Said expenditures must be approved by the Association at a duly called special meeting or at the annual meeting [emphasis added].
(f)
(1) A Capital Reserve Fund, which are moneys set aside for future capital improvements to Association property, shall be segregated into one or more bank accounts. Said moneys shall be used only for capital improvements.
(2) Moneys formerly described as working capital on prior financial statements of the Association which source was the two months assessment at original homeowner title closings, shall be deemed as part of the Capital Reserve Fund. (Sec 3. Amended 10/14/97)

Declaration of Covenants, Restrictions, Easements, Charges and Liens

Article VI. Covenant For Maintenance Assessments

Section 3. Assessments.

The Association’s Board of Directors shall . . . fix and determine the budget representing the sum or sums necessary and adequate for the continued operation of the Association and shall send a copy of the budget and any supplement to the budget to each Member prior to assessing the Members thereon [emphasis added]. The Board shall determine the total amount required, including the operational items such as insurance, repairs, reserves, maintenance and other operating expenses, as well as charges to
cover any deficits from prior years and capital improvements approved by the Board.

Summary:

The answer to Question #1 is unambiguously no.

Whether defined as a routine maintenance activity or a capital improvement, the replacement of the roofs (a capital asset) was clearly anticipated yet not included in either the Operating Budget or the Capital Budget and submitted for membership approval. Moreover, the expense of the project far exceeds the various criteria accorded to Board discretion: 5% contingencies – prior year’s Operating Budget (including the contingency item) plus 2% CPI – a total of $30,000 for all capital projects. The remaining alternative, the emergency exception, was anticipated and accommodated in the By-Laws; that provision expressly requires the approval of emergency expenditures by the members of the Association at a duly called meeting.

The language of Section 3 of Article XI of the Declaration is clear and unambiguous. The roofs of Section I & IA homes have expectedly come to the end of their useful life; they were not ravaged by some unknown or unforeseen agent or action. Their replacement was clearly anticipated. The initial offering documents anticipated their replacement in 20 years. The Board exceeded its authority and assumed discretion not accorded to it by the covenants when it failed to include the cost of the anticipated roof replacement in the Operating Budget or a Capital Budget and submit
same to the membership for approval.

CONTINUED - wondering if we have a leg to stand on here in court. There's a class action lawsuit against the HOA. The lawsuit was filed based upon the Board exceeding their authority in assessing the attached homes without a member vote. Theres another issue below, and also issues about the way we are assessed with the sizes of these attached townhomes being so different in size. I'm more concerned with whether or not the board had the right to pass this assessment without a vote. Thanks for reading! The words all start to look the same to me after reading it over and over again. Need some fresh eyes!!

Question #2: Do the provisions of the covenants authorize the funding of projects and allocation of assessments in the manner administered by the Board of Directors?

The answer to Question #2 is found in the following provisions:

Declaration of Covenants, Restrictions, Easements, Charges and Liens

Article IV. Property Rights In The Properties

Section 2. Title to Common Properties

Prior to conveyance of title to the first Home on The Properties, the Developer shall convey to the Association legal title to the Common Properties subject, however, to the following covenant which shall be deemed to run with the land and shall be binding upon the Association, its successors and assigns:

In order to preserve and enhance the property values and amenities of the
Development, the Common Properties and all facilities are now or hereafter
built or installed thereon, shall at all times be maintained in good repair and
condition and shall be operated in accordance with high standards. The
maintenance and repair of the Common Properties shall include, but not be
limited to [emphasis added], the repair of damage to roadways, walkways,
buildings, tennis courts, pools, Club House, sanitary sewers, sewer pumping
station and other storm drainage sewers and appurtenances, water lines,
outdoor lighting and fences, landscape maintenance, exterior Home and
building maintenance to all Homes and walkways which will consist of staining
or painting the exterior of the Homes, buildings and roof repair and
replacement to the Homes and buildings. Driveways and walkways [emphasis
added] whether on Lots or on Common Area shall be maintained by the
Association. All lines for drainage, sanitary sewers and water lines located
outside of the outside walls of each Home shall be maintained by the
Association.

This Section shall not be amended, as provided for in Article XII, Section 2, to reduce or eliminate the obligation for maintenance and repair of the Common
Properties [emphasis added].

Article VI. Covenant For Maintenance Assessments

Section 3. Assessments.

The total annual requirements and any supplemental requirements shall be allocated between, assessed to, and paid by the Members as follows:

Each member shall pay a portion of said requirements, the numerator of which shall be one (1) and the denominator of which shall be equal to the number of Homes on The Properties subject to this Declaration [emphasis added].

Article IX. Exterior Maintenance

Section 1. Exterior Maintenance.

In addition to maintenance of the Common Areas, the Association shall provide exterior painting or staining to each Home and maintenance of the roof of each home which is subject to assessment under this Declaration [emphasis added].

By-Laws

Article IX. Assessments And Finances

Section 3. Basis of Assessments

d) Each member, whether in good standing or not, shall be assessed his pro rata share of the Association requirements to fund the Operating Budget, the numerator of which shall be one (1) and the denominator of which shall be the number of homes comprising the community known as The Colony at Holbrook,
Section One, Two and Three. (e.g. 1/316 homes = fractional share assessed to each member).

Summary:

The answer to Question #2 is unambiguously no. The January 26, 2011 letter that was signed by each member of the Board expressly stipulated: “The cost for any townhouse maintenance or replacement work comes from the Townhouse Maintenance Reserve Fund and not the Colony’s Operating or Capital Budget . . .” The Board has yet to provide the language that authorized the establishment of a Townhouse Maintenance Reserve Fund.” Review of the
covenants fails to reveal any. To the contrary, Article IV Section 2 of the Declaration clearly and unambiguously stipulates that the Common Properties include the roofs and exteriors of ALL Homes – without further specification
or qualification. Moreover, the provision expressly prohibits amendment to reduce or eliminate the obligation for repair and maintenance of the Common Properties. The Board contravened this provision by exempting Section 2
and 3 Homeowners from it, reducing their dues contributions and establishing, seemingly out of thin air, a “Townhouse Maintenance Reserve Fund” and increasing the dues contributions for Section 1 & 1A Homeowners.

I'm curious as to where you are located. How old are the buildings being re-roofed? How many bids were collected to do this work? How many square feet of roof to be done?

I would be more concerned about the answers to these questions rather than if a vote was necessary. But let me address that, IMO the Board was not required to put this up for owner vote. This is maintenance of an existing structure. In my time on the Board here in NY our attorney has suggested more than once when maintenance work is being performed the Board has the authority to decide such work.

Your concerns about how the CCs are collected and in what portions from different owners is a question with your documents and does not pertain to this particular project.

And the lawsuit you suggest "class action" please explain your understanding of that. What are those who brought the suit looking for? If the vote WAS held how would you vote? To keep the old roofs? So is it your opinion the roofs shou;ld not be replaced or just the owners need to vote to replace them? If the latter seems like a hugh waste of time and money.

My guess the members of the Board are owners? They will pay the same costs then why would they do something out of line when they will suffer too.

It is just possible the roofs need to be replaced. It is possible the property doesn't have the money needed in reserves to do this work. Only one option split the cost up among the property owners.

I would be more concerned about those details rather than who voted to approve this project.

IMO the Board is within their powers to do exactly what they have done.

Several years ago we planned to seal and stripe our parking lots. Small group of folks thought THEY needed to approve the work. So in order to prove a point they would rather the work not get done. Long story short inn court they lost and the big bad Board re-sealed the lots without their approval. Damn them.

Plese let us know how the lawsuit ends. IMO the lawyers will make money and even if you prevail just what will you have accomplished? To benefit the property I mean?

Good luck

The Limit:

(b) Simultaneously with the Operating Budget, described in 3(a) above, the Board of Directors shall also complete a Capital Budget, consisting of items for Capital improvements to be commenced during the budget year as in 3(a) above. Said Capital budget [sic] shall be submitted to the Association for approval at the aforesaid meeting. Mandatory submission for membership approval shall be deemed waived if any particular project does not exceed ten thousand dollars with a maximum of thirty thousand dollars for all projects.

The HOA is saying it's not a capital improvement, but, our HOA President signed a NYS Certificate of Capital Improvement and filed with the roofing contract and the state for tax purposes I am supposing for that reason. Can we file this certificate if it's not a capital improvement? Will a judge consider it a capital improvement because of this certificate our HOA signed??

We are located on Long Island, NY - Suffolk County/

I own my roof, but the HOA maintains it. The total assessment was $900K.

Thanks for all the input here, I greatly appreciate it.

Those are all good questions.